Apple is looking like what Microsoft was 10 years ago—a Bigfoot that squeezes smaller competitors.

A former lieutenant of Steve Jobs's once told me something surprising about his ex-boss. "Steve is a monopolist at heart," he said. "He's just like Bill Gates. He just hasn't been as successful." Well, Jobs is getting there. This summer, Apple's market capitalization surged past Google's, making it the financial king of Silicon Valley. True, Apple still holds only 11 percent of the U.S. consumer PC market, according to researcher NPD [I love how they found some unmeasurable metric to make this number look higher than it really is; Apple owns 8 percent of the US PC market and less than 4 percent worldwide. --Paul], but its influence is far greater than that market share suggests. The iconic iPod dominates its market, and the iTunes music store has sold more than 5 billion songs, making it the No. 1 music retailer in America, ahead of Wal-Mart, according to IDC. Apple's iPhone is the No. 3 smart phone in the United States, according to NPD.

Apple has started looking like what Microsoft was 10 years ago—a company that so controls certain market segments that smaller competitors can survive only by living on its scraps or staying out of its way. (Apple declined to comment for this story.)

The really scary thing about Apple is that it doesn't just make hit products—it controls entire ecosystems. Just as Microsoft controls both the operating system and the applications that run on top of it, Apple owns popular hardware platforms (iPod, iPhone) and operates the only store that can sell music, movies and software programs for those platforms. Apple sets prices and takes 30 percent of the money.

With iPhone, Apple decides which independent applications will be allowed, and it can pull the plug on any application at any time, without explanation—as happened in July to several developers of iPhone apps. "I spent four weeks trying to get through to Apple via e-mail and phone calls, and they wouldn't return my messages," says Cyrus Najmabadi, developer of an iPhone application called Now Playing, an online movie-theater guide that Apple yanked in July after receiving a complaint about the program. (Najmabadi persisted and finally got Apple to put his application back online; Apple declined to comment on the matter.)

Apple's tactics might seem like smart business: why not squeeze every penny out of every deal? The problem is that if Apple squeezes too hard, some partners may go out of business, harming the ecosystem. Bully behavior also invites backlash, as it did for Microsoft when that company rose to power in the 1990s.

So what's the point here? That Apple is "bad" and Microsoft is somehow (by virtue of not being Apple, I guess) "good"?

No.

Microsoft has nothing to do with this story. So drop that line of attack.

It's about Apple. Apple becoming a much more dominant player. Apple exercising its market power and getting some push back from companies that don't like being abused and customers who don't like being treated like they don't matter. It's about that ugly part of Apple's broader "personality" finally becoming more obvious to the wider world. When Apple was just a minority PC maker, no one really paid attention. But when you get really successful--in this case, primarily in digital media--people do pay attention. And yes, Microsoft can tell you how that works. How it is to behave like a much smaller company when you are in fact a corporate behemoth unwittingly (or wittingly, in many cases) harming those around you.

Apple's a big company. They can't behave like they did when Jobs was trying to stave off bankruptcy over a decade ago. And really, that's all this is; Corporate immaturity. If Apple as a corporate entity can learn from the past, they'll figure this out before they end up in a decade-long antitrust case. But my guess is that Jobs' hubris won't let that happen.

Discuss this Article 75

"Honestly Shark. Unless you can convince Paul to stop me from posting (which maybe possible with the advent of thread locking recently) I am pretty much going to post whatever I want to, whenever I want to, and the best part I wont give a rats behind what you think:) "
Apparently you care enough to keep responding to my comments. Anyway, good for you, because I don't think you'll be flattered by what I think about you. I don't give a damn if you give me one star or no star at all. In my opinion, you're nothing but a troll, trying to score cheap shots at Microsoft.
You can argue all night long, but, sadly, you don't realize that you're only proving him right when he says the iCabal cannot take any article that's even slightly critical of Apple.
If you don't want to read articles that are critical of Apple, shut your eyes when Paul mentions Apple or simply stop reading the blog. The same goes for the latest issue of Newsweek. (How dare Dan Lyons compare Apple to Microsoft?) Or better yet, issue an iFatwa against him and everybody who dares speak ill of Apple. I'm sure the leader of your herd has already done that.
And I don't blame Apple for all that snark and arrogance, because that's what people like Lindy (isn't that a woman's name?) want and cheer. And if what you post here is none of my business, neither is what Paul writes any of yours, Lindy. So, you keep commenting and I'll keep pointing out the hypocrisy in your statements. :-)

@mikegalos: "To say they have monopoly power in some markets is a no brainer. They do. Whether that will result in court orders enforcing that is a different issue."
With all due respect, Mike, you're missing the boat on this one. Having a monopoly is not illegal. From the FTC's website: "While it is not illegal to have a monopoly position in a market, the antitrust laws make it unlawful to maintain or attempt to create a monopoly through tactics that either unreasonably exclude firms from the market or significantly impair their ability to compete. A single firm may commit a violation through its unilateral actions, or a violation may result if a group of firms work together to monopolize a market."
THAT is the real question. All this discussion about whether Apple (or Microsoft, or anyone else) HAS a monopoly is irrelevant. It's their actions that count. That's what got Microsoft (the "old, bad Microsoft", to quote Paul) in trouble in the first place.

"The point is that it's not useless without an iPod."
Yes, but how many people are going to spend $400 on an iPod dock and then go and buy a SanDisk? The dock is practically useless with other mp3 players. In fact, some luxury cars provide iPod docks and no line in connection for other media players, which automatically shuts out competing players. Unless Apple does something catastrophic with iPods, there's no reason for people to switch.

"Apple owns popular hardware platforms (iPod, iPhone) and operates the only store that can sell music, movies and software programs for those platforms. Apple sets prices and takes 30 percent of the money."
Lyons knows better. His fact-checker obviously missed the point that music is available from numerous sources for the iPod and movies can be copied to an iPod with relative ease. He does have a point about "software programs".
Apple should take a page from Microsoft and respond thusly: ""This topic has already been covered extensively in the media. This new story repeats old information, and contains rumors and innuendo from anonymous sources, attempting to create a new sensational angle, and is highly irresponsible."
;-)

"There we go again. I've commented on this earlier too. You guys cannot stand it when someone criticizes Apple and have to somehow get Microsoft into the conversation and find a way to criticize it."
This seems to work the other way around too. Once I left a critical comment of Microsoft under a Microsoft-related topic on this Microsoft-related blog, and immediately two guys jumped in and started bashing Apple, because that obviously invalidates any MS-critical argument and, of course, deeply hurts the feelings of whoever thinks MS can sometimes do something wrong.
But that's probably a different thing somehow, isn't it?

lotsa stated:
"While it is not illegal to have a monopoly position in a market, the antitrust laws make it unlawful to maintain or attempt to create a monopoly through tactics that either unreasonably exclude firms from the market or significantly impair their ability to compete. A single firm may commit a violation through its unilateral actions, or a violation may result if a group of firms work together to monopolize a market."
Okay, lotsa. Thanks for that. Now I may proceed.
First, Apple INTENTIONALLY put a kernel panic bomb into OS-X to prevent anyone else from using an Operating System that doesn't have proprietary hardware. That is clearly a "unilateral action that prevents anyone else from competing directly with Apple." I would call that anti-consumer and anti-competitive. The action of a software maker to stifle competition for anyone else using an OS doesn't violate antitrust, but it does stifle competition. Thats where could be tried for violation of the law.
Second, its not always about antitrus but the same rules apply to Apple as it does to Microsoft. Nobody is going to win that Apple, Inc's computer division is a monopoly. However, the same bundling practices that Microsoft was busted for still applies to Apple. The tight integration of applications to work smoothly together while third parties cannot could be another violation. IE and the Windows Explorer tie in? That could be said about all these Apple apps and yet third parties cannot.
Third, the iPod and iTunes monopoly. 80 percent of the world's digital downloads happen at Apple iTunes Store. However, no other music store or device can fairly compete because of the tight controls and lack of fair competition. Can you take a competitor's device to the Apple Store? No. Can any other music store's software directly sync to the iPod? No. This also applies to iPhone and the AT&T exlcusivity contract. So how do these conditions allow for competition?
Finally, there's Mobile Me. Intentionally blocking Microsoft's Internet Explorer from the store. That could be seen as interfering in trade as written in the Sherman Act and expanded on by the Clayton Act.
According to the Clayton Act of 1914, "any person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws." I would see disenfranchising over 70 percent of 1 billion users in multiple nations around the world as a potential violation of the Clayton Act. It prevents Microsoft's customers from directly accessing Mobile Me. What if the consumer doesn't want Firefox or Safari? Its still anti-competitive action against another competitor willful and intentional.
So thanks, lotsa. You just helped me prove that Apple could be seen with 4 potential violations of the Sherman Anti-Trust Act and the Clayton Act. All it takes is one conviction and yes their are court cases in the works. All we need is someone in the DOJ who's got the guts or a consumer advocate who's willing to take on Apple. So thats all legit complaints. The rest of you guys, quit whining about it. You just prove Paul's "iCabal" theory is correct. Where the heck were you guys when we were talking about Google? I rest my case.

Lotsa
I'm well aware that it is not illegal to be a monopoly (or that it even makes you a bad guy)
What it does do, however, is mean you have different rules that you have to play by because you now fall under the "maintain a monopoly" rules.
Apple has to live under those rules whether there's been a ruling of monopoly or not. And they aren't.

Subzero
Exactly right.
What I'd add on the MobileMe/IE7 issue is that since the MobileMe product does, in fact, work with IE7 (as people here have pointed out, ironically, in defense of Apple) and since Apple has IE7 specific features (sharing of IE7 Favorites), Apple has intentionally disparaged a competitor's product with the intent of shutting out the use of that competitor's product with an Apple product that's a part of the iPod/iPhone product line.
If it didn't work correctly and it was discovered at the last moment, Apple might have been OK with putting up a notice like "IE 7 is not supported at this time. We will update the MobileMe page when we add that feature" and, as long as it was true and they were working on it seriously. Putting up a note disparaging IE 7 while MobileMe actually works with it and, in fact, has features tied to it, is just plain bad.

I think a lot of Apple fans view Apple as 'Robin Hood' in the MobileMe/IE issue, trying to steal marketshare from the rich (M$) and give it to the poor (Apple, Mozilla, etc.).
"But that's probably a different thing somehow, isn't it?"
No. It's not. It's just as irritating.

"Apple's a big company. They can't behave like they did when Jobs was trying to stave off bankruptcy over a decade ago. And really, that's all this is; Corporate immaturity."
Oh, my, now that's funny. The best example I know of "corporate immaturity" is Mr. Chair-thrower:
http://www.theregister.co.uk/2005/09/05/chair_chucking/
"Fucking Eric Schmidt is a fucking pussy. I'm going to fucking bury that guy, I have done it before, and I will do it again. I'm going to fucking kill Google."
Now, that's mature, isn't it.
Microsoft, not Apple, is a convicted monopolist. Still being fined by the EU. Read the details:
http://www.roughlydrafted.com/2008/09/08/paul-thurrott-calls-apple-“the-bad-guys”-of-microsofts-300-million-ads/#more-2385
Guys, as you all love to point out when Paul posts his intermittent, "Apple sucks and the proof is in the marketshare numbers", MIcrosoft---not Apple--controls 90+% of the desktops in the world. A BILLION users, remember?
So, which way do you want it? Apple is an irrelevant niche player or Apple is a huge controlling monopolist threat (which I find just hilarious coming from Windows advocates).
Decide which of these mutually exclusive views you want to have, then we can talk seriously.

Subzero
On the exclusivity contract with AT&T and iPhone some notes:
1) Exclusive distribution of the iPhone is a trickier issue since Apple doesn't have anywhere near a monopoly on the phone side. However, since iPhone could easily be ruled a version of the iPod (iPod touch with extra telephony features) they'd have a hard time without pulling the iPod features.
2) They'd also be subject to bundling charges since you cannot get an iPhone with Zune replacing iPod as the music player. And you can't get the equivalent iPod software as an add-on to other phones. Precedent would have Apple required to allow vendors to offer iPhone with other music players as default, provide a user friendly way to pick which music player is the default and offer an iPhone N with no music player bundled for less money in the EU market.
3) Since exclusive contracts are the norm in the cell phone business and since it falls under all those complex telecom rules, it becomes a tricker case on the exclusivity charge. The bundling charge, however, is awfully suspect, though, based on both the DOJ and EU interpretations of bundled middleware.
But, again, I Am Not A Lawyer

SubZero good points but here is where some of it falls apart:
- Google- Last I looked there were plenty of other search engines... Google didn't/doesn't unfairly lock them out.
- MP3 players- There are other MP3 players out there besides the iPod. Why does Apple have to allow them to use their software or sell them MP3s. And on the subject of MP3... why are the record companies forcing Apple to DRM their files, but sell them elsewhere unlocked? If the record companies allowed fopr unlocked files at the store, problem solved.
- OSX. Their are other computers out there which one can freely use for Windows. 4% of the market as is gleefully pointed out time and again is not a monopoly, not even close. Kernel Panics? Where does it say that Apple has support PC hardware? If you are talking about Psystar that is a completely different set of issues that they can't hope to win, and ff it comes remotely close to being winnable, Apple will bury them in appeals, that is if a summary injunction (which seems at least a possibility) doesn't come first.
Barring that Apple can simply stop selling the OS in a box, big loss for everyone and where will the consumer be then? By Bye Pystar's business "model".
As far as anti-trust: as a member of neither political party I can objectively say this, there is no way the DoJ is going against anyone on Anti-Trust. If MS isn't getting split up/ hand slapped, then no one in the Computer industry is. Whoever wins in November is not going to be messing with any comapny in today's economy.

That is a good point Mike, Also, iTunes does not need to add all the software that it wants you to add, obviously, although we are given a choice. Also, if it were illegal, Google and Yahoo toolbars would not be offered on just about every free app on the web.
Still there is more to these anti-trust laws/acts then the few lines typed here.. There is an entire background , including qualifications that we don't have here or even understand. Apple, MS and other companies have every right to protect their intellectual properties. Otherwise, we could sue a Porsche dealer for not selling a Ford [or Lotus for Mike and me]. Heart would not be able to protect 'Barracuda' for use with Palin's ads and any Musician could not sue for improper use of their music [Beatles on iTunes]. Mr Coffee filters do not work in Melita coffee makers, so I should sue. Third party companies sign agreements in order to create software for MS or Apple and they must abide by the agreement, otherwise make it for someone else. MP3 players use software interfaces to add music to them. MS does it as well as Sansa. If you don't like it, don't buy them. If you do buy them, don't cry that you must do things their way as you should have done the research on the usage rules. Companies should listen to consumers, but don't have to commit to every demand. There's reasons why they can or cannot, and some of them are legit...while others obviously are self protective.

BTW, I have been posting a lot the past few days because I've been stuck at home on call [rather than trolling], and a sustained a partial hamstring tear running. Yep Sub, I should have been a little more careful with Creatine. But I'm getting old and lifting is getting tougher, and the dang stuff works a little, and is legal.
Doc

DRWAM said:
"If you don't like it, don't buy them. If you do buy them, don't cry that you must do things their way as you should have done the research on the usage rules."
Wow. Doc, in two short sentences you have cut to the heart of this thread, and virtually negated just about every comment that come before. Well said.

Dude1313
"As far as anti-trust: as a member of neither political party I can objectively say this, there is no way the DoJ is going against anyone on Anti-Trust. If MS isn't getting split up/ hand slapped, then no one in the Computer industry is. Whoever wins in November is not going to be messing with any comapny in today's economy. "
Exactly Backwards
Antitrust law is there to protect the consumer (especially in tough times) and to protect a competitive market (especially in tough times) and not to protect the ability of an entrenched monopoly to abuse their power.
As for the political ramifications, a Obama administration would have little choice in persuing this to make sure there was no question of showing favoritism to Apple due to Obama's friendship with Apple board member, Al Gore. This is much the same as when the Clinton administration had to aggressively pursue charges against Microsoft despite Bill Gates' friendship with President Clinton.

Oh, and Dude1313
Take each point you made about Apple and apply it to Microsoft and you'll see they don't hold up so well under "maintain a monopoly" rules.
In short, if Microsoft can't do it in markets where it's dominent, Apple can't do it in markets they dominate. (downloaded music and related products, possibly OS X based computers, etc)

@Doc - You beat me to the punch on that one. That is pretty close to how I would have responded to Mikes comment - "They'd also be subject to bundling charges since you cannot get an iPhone with Zune replacing iPod as the music player. And you can't get the equivalent iPod software as an add-on to other phones." Your argument regarding suing Porche for not selling Fords should actually read something like this - "I could sue Porche for not selling me a 911 with a Ford 351 Cleveland engine". This is an argument that many, including me, have tried in the past when defending MS for bundling IE.
--tayme

The problem is the same stuff that you can get away with when you don't have a dominant position in the market can get you into trouble when you do. Like I said earlier, if Chrome does become more popular, the issue of locking out rival web services will become important. The same goes for Apple. The car analogy is ridiculous. The engine is part of the car. You cannot buy an engine separately. That's like saying Apple should sell computers with AMD chips. A better analogy would be Dell saying their desktops will work only with Dell monitors.

@mike galos: "Apple has to live under those rules whether there's been a ruling of monopoly or not. And they aren't. "
Citation, please? Has there been a court ruling I'm not aware of?
@subzero: I think it's time for your Valium.
"So thanks, lotsa. You just helped me prove that Apple could be seen with 4 potential violations of the Sherman Anti-Trust Act and the Clayton Act."
*sigh*
Again, from the FTC site:
http://www.ftc.gov/bc/compguide/maintain.htm
"Because the antitrust laws encourage competition that leads to low prices, courts and antitrust authorities challenge predatory activities only when they will lead to higher prices."
Has Apple's "monopoly" in music led to higher prices? Certainly, the lower-priced competition from Amazon (compatible with the iPod) would indicate "no". iPods aren't the lowest-priced mp3 players out there, either. And the iPhone hasn't maintained any kind of premium pricing (look at the recent Palm Treo for a perfect example).
If anyone should be charged with these kinds of violations, it's the record labels who encourage price-fixing, determine who can and can't offer DRM-free music, and are actively manipulating the market.
Based on the FTC's guidelines above, I don't see any problem for Apple. But then, I'm not a zealot.

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